The Income Tax Department has recently uncovered significant foreign assets owned by Indian taxpayers. As taxpayers, we all aim to save on income tax through legitimate means, and the funds we pay as tax are used for the creation of assets, both domestic and foreign. When assets are located in India, the rules are more lenient, but when a taxpayer purchases foreign assets, the rules of the Foreign Exchange Management Act (FEMA) and the Income Tax Act come into play.
According to the Income Tax Act, if an Indian resident holds foreign assets such as shares, property, units, or other investments, they must disclose these assets to the Income Tax authorities by filing an income tax return. If a taxpayer owns assets in India, they are required to report these only if their income exceeds Rs. 50 lakhs. However, when it comes to foreign assets, there is no income threshold. This means that if you hold any foreign assets, you are obligated to report them in the income tax return schedule.
Many people fail to report their foreign assets, either intentionally or unintentionally. However, not reporting these assets can result in severe penalties, with fines of up to Rs. 10 lakhs for failing to disclose foreign assets.
Recently, an article published by The Economic Times revealed that the Income Tax Department had discovered a whopping Rs. 22,000 crore in undisclosed foreign income. This discovery was made under a special drive initiated by the Income Tax Department in November 2024. This drive was based on the exchange of information through a bilateral agreement between countries. The department has been using this method to identify foreign assets and unreported income.
There are numerous instances where individuals holding foreign assets fail to file their income tax returns. The Income Tax Department is particularly concerned about taxpayers who own foreign assets but neglect to report them. To address this, the department has been analyzing data from Form 15CC filed by authorized dealers.
The Income Tax Department regularly runs campaigns urging taxpayers to report their foreign assets in their income tax returns and to file updated returns if necessary. Despite these efforts, many taxpayers have failed to take the required actions. To encourage compliance, the Central Board of Direct Taxes (CBDT) has granted an additional 15 days for taxpayers to file reports of international transactions.
The Income Tax Department is committed to ensuring that taxpayers disclose all foreign assets and income, and those who fail to do so could face serious consequences. It is essential for taxpayers to be aware of their reporting obligations and take the necessary steps to avoid penalties. By doing so, they can ensure that they comply with tax laws and contribute to the proper functioning of the country’s tax system.
